There are millions of Americans who rely on Social Security as their primary source of income. Every year, the Social Security Administration (SSA) announces the cost-of-living adjustment, or COLA for the following year. The COLA helps retirees keep up with the rising costs of the economy.
As a result of the government shutdown, the COLA announcement had been delayed and will now be announced on the 24th of October. Data suggest that the COLA for 2026 is expected to be around 2.7% and 2.8%.
There are many families who live on fixed incomes, and they struggle to keep up with expenses, this upcoming increase doesn’t feel like something that’s going to make a major difference in terms of their finances.
What the New COLA Could Mean
According to the forecast, benefits for retirees will grow by 2.7% to 2.8% beginning in January 2026. That would equate to around $52 more per month, just over $600 more for the year, for someone getting the typical monthly benefit of about $1,950.
This may sound like a major difference but for those elder Americans who are already struggling to get by the extra money will barely cover the increase in costs of food and utilities.
Inflation Is Cooling, But Prices Remain High
Even though inflation did slow down as compared to the years of 2022 and 2023, the prices of essential items are still much higher than what they were before the pandemic. Retirees are struggling to keep up.
Many experts note that the decline in inflation does not mean that the cost of things are becoming cheaper, but rather, just not increasing as fast as they used to.
Why the COLA Formula Doesn’t Fully Reflect Retiree Costs
For years, there has been criticism of the government’s COLA calculation process. It is based on how working Americans, not pensioners, spend their money. Generally speaking, older folks spend more on housing, prescription medications, and healthcare, all of which tend to increase more quickly than overall inflation.
The Lingering Impact of Recent Inflation
The last few years had seen some high COLAs, in 2023 the COLA was 8.7% and in 2024, the COLA was 3.2%. These increases helped majorly in offsetting the increasing prices of goods and services.
Now that the COLA will be much smaller, retirees are concerned that they would find themselves struggling financially.
The Bigger Picture: COLA and Medicare Costs
The other factor to be mindful of is Medicare premiums. Medicare premiums are deducted directly from Social Security benefits, and should Medicare premiums increase, many retirees may not even see the COLA as Medicare premiums would wipe out the increase.
For someone with a low benefit, for instance, a $15–$20 monthly increase in Medicare Part B premiums might easily cover a large portion of the COLA. This implies that while benefits may theoretically rise, the real take-home pay may hardly alter.
Looking Ahead
Even though a COLA increase will come next year, it’s unfortunate that Social Security benefits may not be able to keep up with the rising costs of the economy as people are already struggling.
There are many officials who are pushing for changes to the systems so that the program is strengthened and sustained for those retirees who really depend on it. There are many ideas floating around such as ensuring that the data is based on accurate information about retiree spending or implement a COLA cap on benefit increases. These changes are meant to solve the funding issue that the Social Security system is currently facing.
It’s important for retirees to keep updated with verified information as the program undergoes many changes and seek assistance from a financial advisor should they need now. Yes, a raise is good, but it’s important that the raise also keeps up with the rising costs of the economy.
With that being said, retirees are urged to look into other savings options and not rely solely on Social Security.